we begin with breaking news. apple shares halted as the company announced it has cut its revenue forecast. tim cook revised revenue guidance, down. writing the vast majority happened in china with lower sales than anticipated. fewer iphone upgrades worldwide. joining me on the food, -- phone, butler of bloomberg intelligence. i want to start with you.

what is your reaction to this? they are saying, we were too optimistic. , just howecedented difficult it is to get consumers to upgrade their smart phones. amazing,e devices are there are more products competing. a lot of devices competing. cook zeros in on china and says the majority of the shortfall happened there. apple expect this? >> i don't know the answer to that. i think that is the most interesting question. not just for apple but for the entire global economy. how fast is china decelerating?

i was surprised by how much the market was surprised by that. a warning18, we got saying the chinese economy was to sorting faster than they expected. why so many companies are being blindsided by the chinese economy. i think the implications are huge. it is going to create a lot of anxiety no one has a feel for. >> apple shares have resumed trading, down about 7%. why didn't apple for see this? builts a market tim cook personally. >> it is difficult for me to answer that in terms of why did tim cook anticipate this

downturn? the best comment i can make is it is becoming more complex. for consumers to make these decisions. pcs were selling phones and . consumers needed those devices. there is a lot more what i would call revenue. less of a need to have it and more nice to have. what do you think is the most alarming thing? the fact that in general, around the world, tim cook says people are not upgrading iphones as fast as they used to? me asis not alarming to somebody who studies consumer behavior. it is not alarming to me, but it calculating those

stock prices or forecasting volume. getting harder and harder. it is not just about the pixels, how shiny the screen is. it is lot more nuanced. it is getting harder to convince them not only do they need more products but they need to upgrade what they have now. hashe smartphone market gotten more competitive. competitors offering iphones at cheaper prices. joining us now. some other details in this letter. he mentioned there were supply constraint issues. macbook air,ch, other products apple is betting some of thep for shortfall when it comes to these upgrades. the do you make of some of

additional headlines, given the trying to transition to more of bus services company? orre could be strength weakness across the product line. foremost ant and iphone problem. the problems is really are centered mostly in china. if you listen to what apple had to say, they were hinting they did not predict this weakness. it is something that emerged during the quarter, which tells me they didn't hit the right note with the latest iphones in china in particular. look at the comments on the other product lines. is on the iphone and with the issues may be. to yourgoes back

earlier point. he says, we cannot change macro economic conditions. to some extent, isn't a lot of this out of the company's control? >> that was my favorite line in the letter. as powerful as apple is, they cannot change macro economic conditions. to put the trade war in the center of investor focus. we heard president trump -- he called the market selloff a glitch. we know the president cares a lot about the stock market and sees it as a report card on his performance. put further pressure to get some sort of deal. you are going to have this stock

market bubble. there are other issues, but they specifically -- tim cook did call out trade. that is going to heighten pressure. the tariff issue, very unresolved. what does that mean for apple? >> let me add on a point. it raises another question of how important is the device over the long term versus the platforms and services on top of the devices? music or content, all of these services work across a lot of these devices. every manufacturer has to be thinking, what is my role? am i going to become more commoditized?

>> thank you so much for calling in. our host, thank you so much for continuing to cover this breaking news. tim cook cutting the guidance for the company. a fairly significant cut which he is saying is due to a shortfall in china. fewer upgrades of the iphone around the world. want to thank our listeners. we will be covering this story on bloomberg television over the next several hours. we will be back after this. ♪

washington has been in a stalemate since december 22. while the congress and the president try to work out a deal, we are seeing a stalemate. for load oreen continue to work without pay. the federal communications commission will suspend operations if the shutdown continues. our guest is a fellow at the georgetown law institute. does the shutdown look

like? they are going to give more details later today. couple of days. lasts a couple of weeks, that could have a huge impact. filings get delayed. they cannot work on the transaction. impact on major proceedings. the shutdown lasts more than a few days.

could it change the results? >> let me explain how the fcc looks at mergers. where they clock decide whether to be given the green light we are about 100 days into the clock. when there is a stoppage of any shutdown,vernment they stop that clock. certainly a government shut down will told :00 a again. oll the clock again. it is a goal they set for themselves.

you cannot have meetings with meetings,rs, internal with the department of justice, that is going to slow down consideration of this and other mergers. >> spectrum auctions will continue. an agenda be can derailed during a shutdown? >> it has to be derailed. was a statement saying, if -- there was as 911 outage. it would continue during the shutdown. affect auctions?

i don't expect that work to continue. a longshutdown last time, it can derail an agenda. the agenda for big tech? it has an ongoing investigation into facebook, which could be slowed down. >> you are probably cheering the government shutdown. in lateleft congress december, facebook, google, ther companies were in cross hairs. the ftc was doing an on privacy issues around that company. that work is stopping.

happy.are facebook, you >> are we looking at a delay? could this lead to a different outcome? think it will affect the outcome, it is a delay. nobody can come in and convince anybody to look at this differently. i don't know what would change the outcome. with regard to the sprint t-mobile merger. external happens that could change the outcome. the fact the government is not working is not going to lead to a change in outcome in my opinion. >> what does this mean for consumers. complaint ifle a you feel your privacy has been violated.

about tech just companies. the government can't help you and will not help you. that isone thing interesting. it will not act on any consumer complaints. promotenot work to competition. it will not engage in consumer protection. if you are a consumer and you in aaving a problem overseas,e economy you have no place to go to. >> we will be looking for any break. great to have your perspective here. thank you so much for waiting in. tech tumble carry into the

new year? we will discuss what's to come ahead. ♪

years, tech giants have driven wall street higher. techinvestment sentiment companies could do no wrong. about what istalk 2019, what are we looking at as we head into the new year? 2019 looks to be riskier

overall. a lot of different factors. some company specific. maybe the most obvious example is facebook which is facing a risk year regulatory environment. you could maybe say the same thing for alphabet. a lot of questions about user privacy. see moresible we could aggressive stance is being taken against these kinds of companies. made a slight has come book -- come back. >> these companies have been volatile four months. most of them have fallen into bear market territory. people continue to like them as a growth story but it is highly likely you are going to see big moves for the next several months. a chart showing the

performance of names over the months.eral whatple, the big issue is demand are they seeing for iphones? amazon had a weaker than expected revenue read, as did apple. those are concerns people are going to be looking at. maybe they will be able to avert some of the slide. based see a time of growth. amazon is like for its web services division. on and on.

netflix is an anomaly. high multiple, because the market in general has become less friendly to high-growth stocks, there are steep declines. closed out 2018 as the best performing of all the fangs. they are scheduled to have a content drop this month. can the momentum continue? >> that is the real question. we are an environment less forgiving. monetary policy becoming tighter. there are more risks of a recession. without leaves a stock like netflix remains to be seen. companies were

willing to forgive. . >> what about regulatory issues? weeks haveuple of been an anomaly. effort tooncerted engage with the administration. it has been different for jeff bezos. will we see more of that? >> that is going to be a major subject. bezos not or how much the trump rivalry is going to impact shares. like facebook, that has been the subject of bipartisan criticism. it is more likely you will see something of action.

what it would mean for profits or margins. it is more of a risk than an opportunity. dodd the media spotlight. shares down from july. what does the year hold? >> they are facing some of the regulatory concerns. action, it is likely to have an effect on off of that. it is not quite as flashy as netflix. mature company in terms of valuation. growth name. high

be lots to talk about in terms of the ups and downs. thank you for weighing in. coming up, what is amazon's brick and mortar strategy for the coming year ? we will tell you where. later in the program, wife might get hard to find an episode of an original netflix show if you live in saudi arabia. that is next. ♪

emily: tegs la tumbles on the first trading dave the year. this after an across the line price cut raising concerns. for more, i bring in greg trudeau. what does this mean for elon usk? >> this was a tumultuous year we put a close on in 2018 where it on my was all over the place. -- elon musk was all over the place. they got their stuff together from a production standpoint. so for 2019, there is lots of concern how many cars tesla can make.

there is more concern about where demand is, and it remains to be seen how big a concern that is. the question everyone is worried about after today's results is whether the price cut is indicative of a concern on tesla's part with the tax credit being halved as of january 31, whether or not that will be a major issue into 2019. emily: if the ev market is only growing, doesn't tesla have first mover advantage? >> that is why i say it remains to be seen. not only is there still plenty of demand for tesla's product, even the bears will tell you this is a company with a hot brand. they also have the ability to pull some levers overseas with

the model three. they are bringing that car out to europe and china. obviously those are markets that haven't been halved yet for the car. there is pent-up demand for the vehicle. it is a concern whether or not we are going to see a peek for this company -- a peak for this company. the price point was of concern. it is not something people were expecting tesla to announce. emily: talk about outstanding issues in the wake of the settlement with the sec. are they still looking for independent board directors? >> that was a story that broke over the holiday break people may have missed. larry ellison was brought in as one of the two new independent directors. he was the big name for them. they also brought in a human relations executive who has a lot of big company xperience. there is concern about whether those picks or sort of the right ones for the company because allison in particular, he is a

big name but i think you some people excited, he is also a friend of elon and came out and said as much a few months back and stepped up to speak in his defense, and there was coverage of his take private tweets and smoking marijuana. for him to defend elon, and then a couple months later, be picked s one of the two new independent directors, raised some red flags for some. you are seeing that in analyst commentary today that maybe there was a missed opportunity were tesla quit -- where tesla could have brought in someone to serve as a check on elon usk. emily: certainly once to watch in 2019. thank you for stopping. amidst amazon's efforts to

dominate consumer experience, they have branched out into roceries and speakers. amazon could benefit if they make into a new industry, opening up gas stations. this analyst joins us from new york. we had gene munster talking about how he believes cars will be 100% electric in 15 year, why gas stations? >> you could think of it as fueling stations, somewhere a consumer goes to get gas or charge their vehicle. also have the ability to visit a convenience story -- convenience store. the important point for amazon s this could give them 1000, 2,000 points of distribution with commercial rather than esidential addresses, to lower the cost of shipping.

costco, 10% of their sales come from gas. this could lower expenses on delivery side. both of those are important for amazon. emily: is there any indication amazon is exploring something like this? >> there is none. if you go back in time before they acquired whole foods as if there may have been some consideration or chatter they were looking at bj's wholesale club, and they have locations with gas stations but i haven't heard a lot of speculation that they are looking at this pecifically. emily: let's say amazon is nterested. how do you think they will roll this out? > if you look at their historical m&a strategy, it is billed first, by secon -- buy second. they could test and learn.

they could see to what extent consumers appreciate the opportunity to save money on gas when they are prime members. is it having a positive impact generating new members or renewals? or they could make acquisitions like in the case of whole foods after advance -- advancing amazon fresh or like in zappa's shoes. illed first, -- build first, buy second. emily: they have whole foods, they will open up more. there is the amazon go store, the amazon for star store -- four-start store. it is disparate. is there more coherence going forward? >> the cohesion will be five years from now when i am calling amazon foods, which is whole foods.

after making a number of changes, you will move into amazon foods, and they will have a pharmacy which they don't have today. they already have the lockers and are giving you lower prices on products especially if you are a prime consumer. this will also have delivery options. we know they replaced in -- instacart with their own amazon gressry delivery. the difference is proprietary products in the store year round, not just at holiday. to your point, they have disparate things they are trying in retail physical stores, but i see amazon stores, a transformation of whole foods ncorporating everything. emily: what are the biggest risks for amazon? >> for amazon there is a huge risk. nvestors are getting used to the new amazon which we call

profit incorporated. if you look at cloud computing, advertising and certain -- and third-party retail, 53% of units sold in the third quarter, their fastest growing businesses are their highest margin businesses. but if you look at the performance in june and september, earnings per share was higher than expected, double in fact in june, but sales were weaker. that will take time for investors to digest the new amazon, profit incorporated. emily: you mentioned five years from now. what do you think are the biggest challenges on a longer ime? >> while acknowledging microsoft is the most valuable, if you look at what has slowed walmart and microsoft, it was decelerating growth and multiple contractions. that is the big challenge. they do have a number of initiatives underway including

advancing efforts in gross -- in grocery sales, apparel and b2b outside commerce stuff that could generate higher sales growth and higher profits which could sustain the stock for years to come. that is the big challenge for amazon, finding that sustained topline growth. emily: all right, always good to ave you. we will be watching. michael is boosting his investment in cryptocurrency in the wake of the bitcoin meltdown. the founder of galaxy digital holdings has acquired another 2.7% of the company. he controls almost 80% of the stock, share of galaxy digital. prices in the digital asset market collapsed last year. we ask the former president john cryan about netflix's decision to ban an episode of one of its episodes in saudi arabia. this is bloomberg. ♪

emily: fans of a new netflix program will find trouble finding an episode if they live in saudi arabia. they banned an episode of "patriot act" that involved jamal khashoggi. they were taking the relationship between the united states and saudi arabia when he was killed in the consulate. here to talk about this and all other news, the president of the links -- of vilynx. he was the president of cnn.

what do you make of their decision to cave to the saudi arabia and government? -- saudi arabian government? >> it is pretty odd. ow many subscribers are there? makes you wonder what they felt was at stake, where they could have made a clear statement. get ready for more of this as american companies face the perils, media companies face the perils of expanding internationally. they need to play by the local rules. google has found that in china, and you will see more of it in countries with autocratic leaders. emily: what happens in other countries, let's say south america, asia? all markets where netflix is really banking on international subscribers? jon: we count on america bringing its values with this -- with us where we do business overseas. if we don't do that, what kind

of world does this become? one of the more fortunate was where netflix said they were taking down the program in light of a valid complaint from the audi government. they said there is a law against sprees getting -- against speaking your mind or criticizing the government, so it was a legal issue but the person who, the publicis at netflix -- publicis who used that, they have a reason for taking that person out the door. hat was unfortunate. emily: the saudi government said t violated their

anti-cybercrime laws to get more specific. also netflix bringing on a new cfo, from activision blizzard, spencer newman. this is a company that will spend billions of dollars on new content. we will see a big drop of new shows this month. what challenges is this new cfo going to inherit? jon: winter is coming for netflix in terms of competition and a more expensive operation. they want spencer newman because he has experience with reduction finance. he worked at disney. they will have to be creating more original programs moving forward, because all of the studios in hollywood are pulling movies and tv series off of netflix eerie what netflix is facing -- off of netflix. what netflix is facing, they may be the aol of ogt. aol popularized a new consumer abit, going online, but they were not defensible.

when people learned to go online, they found out what they wanted. netflix has popularized streaming, but now we know how to stream, we can find all kinds of material in all kinds of places. this year you have disney launching a rival, you have at&t bulking up, going to combine hbo and other warner media content for a new over-the-top subscription play, nbc niversal, apple. if they have a tough fourth quarter, wait until 2019 and 2020. it will not get easier. it will get more expensive. netflix' s big advantage -- netflix's big advantage is they know how users are using content. they are ai powered to nderstand user we have years

and match that to content. that enabled them to delight subscribers. they know what you want to watch next. that has been fantastic. the thing is all of the other companies i named are aware they need to become ai ready. i helped to run an ai company that services media companies. believe me, netflix's rivals are spending money on matching if not exceeding the ai capabilities of netflix. o ahead. emily: you have two apocalyptic things, that winter is coming and they could become the aol, it is hard to envision that. couldn't they still become just another studio that makes good content? jon: just another studio that makes good content doesn't deserve the valuation they have een getting. if that is what they become, look for their stock price to take a hit. it was hard to envision aol being the aol of its time. it was a giant.

they bought time warner back hen. it is hard to envision. the thing about technology is new technology, with the traditional -- what the traditional media companies entering this space are adopting, it is always faster, cheaper and more efficient than legacy technology which is what netflix is settled with -- saddled with. they were the first to use artificial intelligence, but that becomes a disadvantage when others integrate the latest and greatest. they can spend their way out of it or try to, but it becomes very expensive. at some point they will stop being valued as a start up and start being valued the way their media competitors are. that's big it of cash -- that prague get -- that spigot of cash will slow down. it may not happen in 2019 but over the next several years, it

will be a stiffer headwind they are sailing into. emily: i want you to stick around. the former president of cnn peaking with us. usings instagram in iran is about to become more difficult. we will look at the country's social media crackdown. this is bloomberg. ♪

emily: we just told you about netflix blocking an episode of a program in saudi arabia critical of the country's rulers. in iran there is another digital crackdown, blocking access to instagram. the photo sharing network would join facebook, twitter and telegram as being off graham its -- off limits to iranian citizens.

this is not unexpected because the government has been making oves towards this. ut you have several government officials and iran who are -- in iran who are fond of social media. >> it is interesting. this is one of the last remaining social network in iran that had any sort of broad relevance. you are seeing instagram considered not just as a place for photos of food or puppies or vacation but also political speech. that is something that came to light with in terms of russia's efforts. never a good thing when a

company bans a platform, but it does seem that governments are thinking of it less as a harmless place for beautiful photos. emily: cnn had its own troubles dealing with the iranian government. what is your take on this? this is stretching to social media. jon: it is so interesting you see saudi arabia and iran, who are enemies, engaging in the same sort of practices. what they have in common is they are unpopular autocratic regimes that have serious internal challenges. it smells of panic in a lot of ways. what we don't know is how effective this can be. in china the censorship with social media has been effective as far as we know. it may be these regimes are able to snuff out the free exchange of ideas by shutting down social platforms. i think the china example tells you unless you are 1000% all in

on repression, it is hard to stamp out this kind of exchange. it is disturbing and it is unfortunate. i think the jury is still out whether it will work for these regimes or not. emily: i was working at cnn in eijing when facebook was shut down in china. mark zuckerberg said we are different from a year ago. we have fundamentally altered our dna to focus on preventing harm in our services and we shifted a large portion of our company to work on preventing harm. he talked about 30 thousand people working in safety and security. does that -- does that jive about the internal messaging? sarah: the company is thinking essimistically about how users might use its services. for zuckerberg to say we fundamentally altered our dna,

from what i have heard, it is still metrics-based, -- sarah: the company will look for growth in new areas. the changes to facebook itself to make it a healthier platform coincide with the natural decrease in engagement there. it is going to be hard for investors to separate what is users' general using facebook less because they don't like it, and what is their own decision-making around reducing viral content? facebook will keep trying to tell investors all of this is its own doing. emily: zuckerberg had a more upbeat post, here is to a great 019. obviously it was a tough year, it will be another one for facebook. what is their view, not just

facebook but instagram, whatsapp, and 2019? jon: what come -- what happens to a company were people said hey, now they say eew. he abstract thing in the air about facebook was it was fun and loose and you could be yourself. how can you be yourself in an environment you suspect everybody is looking in? it is like everyone is going through your medicine chest at your house. it is difficult to attack. what they need is a human face representing trustworthy, benign intent. i'm not sure they have that. emily: would -- emily: would it be nick clegg, the new person they brought in from the u.k. to change the image? sarah: that is what they hope. zuckerberg is pointing to the change of face.

he also mentioned in his note that he will give more power to the public. he doesn't say what that looks like, but they will allow content review. that will be interesting. emily: you will be busy, so will we. they do for joining us. thank you all for joining us. see you back tomorrow. ♪

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